Keppel Corp has confirmed that it cancelled a second drilling rig newbuilding contract from Norwegian owner Awilco Drilling.
Meanwhile, Norwegian financial news daily Finansavisen reports that two companies are locked into a dispute that is expected to land in arbitration.
Keppel said it had assessed that Awilco Drilling would “not be able to make payment of the second instalment” which is due in March 2021.
Keppel Corp said it “reserved the right” to retain the amounts already paid by Oslo-listed Awilco to date, which amount to around $43m.
The company also said that it would also “seek reimbursement” of the costs of the project up to the date of termination.
However, Awilco Drilling has claimed that it paid scheduled instalments in cash, with the first rig scheduled for delivery in the spring of 2021 and the second in March 2022.
However, Awilco Drilling’s investor relations head Cathrine Haavind told Finansavisen: “We have fulfilled our obligations on the contracts and expects the yard to do the same.”
Awilco Drilling claims construction of the rigs has been seriously delayed and that the quality is lacking, claims that Keppel denies.
Keppel Corp cancelled the first of two rigs it was building for Awilco Drilling in June this year, after it allegedly failed to make a payment.
The rigs, which are intended for harsh environment use, were ordered in March 2018 at a cost of $425m each.
Separately, Keppel Corp also disclosed that subsidiary company FELS Offshore had entered a lock-up agreement for a proposed restructuring of floating accommodation vessel operator Floatel.
The lock-up agreement includes an ad hoc group (AHG) of holders of $400m-worth of Floatel’s 9% senior secured first lien bonds, as well as other consenting bondholders who control over 56% by value of the bonds.
The lock-up agreement will commit Floatel, Keppel Corp, the AHG and any acceding bondholders to attempt a financial and corporate restructuring of Floatel.
Keppel Corp recently announced a strategic review of its offshore and marine activities, which may see them offloaded or merged with another entity.
The review will see it examine the strategy and business model of its offshore and marine arm, assess its current capacity and global network of yards and restructuring to seek opportunities as a developer of renewable energy assets.
Keppel Corp, which is looking to adopt an increased asset-light business model, said it had “identified assets” that can potentially be monetised over time.
The company said these included rigs which were described as “non-core assets”, but not fixed assets such as shipyards.
